Overspending

The province's auditor general is not supposed to love everything that the government is doing. As the chief examiner of how governments spend and misspend your money, if there is ever a year when the auditor has nothing but good things to say, it would probably also be the year we'd need a new auditor general.

This year is no exception, with concerns about everything from public tendering to the Newfoundland and Labrador Liquor Corporation failing to adequately inspect licenced premises. More on those another day.

Because this year's report, in a section examining the relatively boring section known as the consolidated summary financial statements of the province for the year ended March 31, 2012, contains probably the clearest condemnation of the province's waste of huge oilfield revenues that an auditor general has put forward in years.

The auditor highlighted the section with its own news release and bullet points, many of which should strike alarm in taxpayers across the province.

They're dry enough, but taken altogether, they outline a series of concerns about the fiscal direction we're all heading in. Here are the most serious six:

° While provincial net debt has declined to $7.8 billion at March 31, 2012, a forecast deficit in 2012-13 of $726 million will push net debt to an estimated $8.9 billion by March 31, 2013.

° Provincial obligations related to employee future benefits (pensions and group health and life insurance) continue to increase. The combined liability exceeds $5 billion at March 31, 2012.

° Expenses have grown by $3.1 billion from 2002-03 to 2011-12, a cumulative growth rate of 66 per cent over this period.

° Per capita expenses in Newfoundland and Labrador are the highest of any province in Canada and are 50 per cent higher than the average of all other provinces for the year ended March 31, 2012.

° Spending on tangible capital assets (infrastructure) averaged approximately $750 million in the fiscal years ended March 31, 2011 and 2012 - approximately three times greater than the average annual spending on tangible capital assets from 2003 to 2010.

° Changing demographics in Newfoundland and Labrador will have a significant impact on the nature of services required, how they are delivered and their associated cost.

To put that in simpler terms, per capita, we're outspending every other province, our debt is now growing, and expenses - including two years of capital spending that peaked in 2012 and 2011 at 300 per cent of earlier rates - are also leapfrogging ahead. We're unlikely to be able to continue to operate like that in any way, especially as provincial oil revenues are scheduled to slide and our population ages out of prime earning and taxing years and into higher-cost retirement.

There are, of course, reasons for most spending: the government would argue it was repairing infrastructure that had been virtually abandoned in lean years, and probably could make a case that it's expensive to provide services to a small and spread-out population.

But if there's a clear message in something as simple as the auditor general's bullet points, it's that we depend too much on oil revenues and that, in the final analysis, we can't afford the lifestyle that we've recently grown accustomed to.

Comments

Comments

Your name*Email*Comment*

Recent comments

Overspending is the NL Way

January 24, 2013 - 13:00

Overspending is our tradition. The AG says spending was up 66% since 2003 but it's always going up. The decsde before that saw spending increase almost 50% but that spending was financed through borrowing. Good luck telling any region or group that they're going to get cut back. Most of that spending increase occurred in health, education and social services. So guess where the cut backs are going to take place. Instead people are demanding more spending such as a new hospital in Corner Brook or keeping small schools open.

The only job growth in the province is government jobs....the trick to 'kicking the can down the road' is to jump out to a cushy retirement just before you kick the can one time too many. Of course, what's left behind is nothing but a dented, beaten up, useless can left at the curb.

Paul

January 24, 2013 - 12:51

It is fine to say that there was not a lot in the way of infrastructure spending in many years prior to the conservatives, however, when the oil revenues started to pour in we lost a tremendous opportunity to rid ourselves of our debt load altogether including future pension liabilities. It would have been tough seeing so much go to debt, but by now we possibly could have been debt free and no pension liabilities. We could have said to hell with a loan guarantee as we could have gotten a similar rate without the conditions Ottawa shackled us with. A golden opportunity lost as we spent like there was no tomorrow. We ignored industries with renewable resources allowing companies to send fish to other parts of the world for processing and doing nothing to promote a sustainable lumber industry. The conservatives bought their way to popularity and allowed themselves to be governed by the almighty Oil. Now look at what they stuck us with.

You're giving too much credit to Newfoundland's place in the world....if virtually no one beyond here even noticed what we did to our cod fishery, I'm sure this won't be much of a blip either. This debacle is all purely for our own "enjoyment".

Rose

January 24, 2013 - 10:48

I guess Newfoundland is not worth saving.
If this situation happened in public sector business the person responsible would be FIRED. and the business would be brankrupt.
Where are the salary and expense account cuts for the senior people in our govt.?
Should the be staying in hotels, travelling and fine dining on our money?
Why are we paying for people we can't afford?

The 2011, 2012 spending spree is related to buying our votes with our money for the election. Cuts are required to provide for the next spree in 2015. The reviews included are important. However; why are big ticket items not covered in the report such as: how did we get to be forecasting $125 per barrel oil?; how much was spent without house approval to keep Nalcor going?; who were let lucrative contracts for Muskrat and how were they picked?; why did government accept $150 million in lieu of local work for Hebron and why was the money all spent/committed when it was announced?- was the $150 million from Hebron partners or our own money?; did the huge cost increase at Hebron come as a surprise to the government; did the government know about the new aboriginal groups/agreements by the feds when the loan guarantee was being received from the feds? What are the implications for the NL taxpayer?

Since 1949, the trick to getting elected here was to promise the moon, and then gently tell people that you had no money. Today, you have 1) provincial coffers gushing with money, 2) "professional" politicians with no financial or budgetary management skills whatsoever, and an immature teenager's urge to spend every thin dime, 3) an electorate that was weened on expensive promises and empty bribes, and 4) no ability to prioritize or focus...just a dollop here and a dollop there for everyone and everything. This won't end well for us...but it will be a cautionary tale to all Carribbean, African and emerging ex-Soviet countries in what not to do with good fortune.

It's funny. When the oil money started to come in, every corner of the province (including newspaper editors) demanded it's share of the money. Now people are complaining that we're spending too much. And they're right, but who is going to give up that money.

So with combined liiabilities approaching 14 Billion, and no political will to address the situtation, government names a Deputy Minister whose job it is to find a generation of suckers to come and pay for all of this.